puput swastika, fsa final project

I. GETTING ACQUAINTED WITH THE ANNUAL REPORT

A. GENERAL INFORMATION

General information may be in several places of annual reports. This information

generally appears at the beggining of the report, the end of the annual report, or on or

near the inside back cover.

Answer the following questons about the annual report you have selected:

1. What is the name of the corporation you will analyze?

PT Perusahaan Gas Negara (Persero) Tbk

2. The corporate headquarters is located in what city?

Jalan KH Zainul Arifin No.20 Jakarta, Indonesia

3. When is the fiscal year end of the corporation?

Not available (long last)

4. What is (are) the primary product (s) or sevice (s) of the corporation?

Services are transmission and distribution of natural gas, consist of

household, commercial, power plant, and industry.

5. The corporation must show high and low selling prices of the corporation’s

common stock each quarter for last two years. Chart the common stock prices

over the last two years. (seasonality worksheet)

a. In the chart, mark the high price of each quarter with an X, mark tje

low price of each quarter with a *.

b. Connect the high prices with a line to indicate the trand. Thn conect

the low prices with a dotted line.

Financial Analysis ‘ Perusahaan Gas Negara Tbk.’

1st 2008

2nd 2008

3rd 2008

4th 2008

1st 2009

2nd 2009

3rd 2009

4th 2009

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

high pricelow price

6. Describe the trend in the price of common stock over last two years. (for

example, was it upward, downword, volatile, or constant).

Answer:

Because of stock split at 3rd quarter 2008, the trend in the price of common

stock was volatile during split off, but genarally upward after stock split

point, the trend was upward.

7. Did the stock trade within a narrow or wide price range? ( for two years

period, a range in excess of the 15% of the lowest price wouldlikely be

considered wide).

Answer:

The wide price range more than 15% in almost quarter such as in 4th quarter

2009, 3rd quarter 2009, 2nd quarter 2009, 4th quarter 2008, 3rd quarter 2008

and 1st 2008.

B. INTERNET INFORMATION

The Corporate Website

1. What is teh internet address of the corporation?

Internet address: www.pgn.co.id


2. Corporation often provide financial information in the website under link

names such as “investor relations” or “investor information”. Indicate which

items appear in the part of the website that relates to investors:

√ operating highlight

√ information relating to corporate governance

√ stock price information

√ press releases

√ annual reports

__ SEC filings

√ proxy statement

√ investor relations contacts

3. What are other purpose of the website?

√ describe the corporation

√ advertise corporate products or services

√ facilitate the sale of company products or sevices

√ provide product financing information

√ identify the location of retail sales sites

√ provide customer sevice information

√ publicize corporate citizenship

√ publicize recent corporate events

√ promote the industy the corporation is in

√ provide employment information

The Securities Exchange Commission’s EDGAR Database.

The primary pupose of the securities and exchange commission (SEC) is to protect

investors and maintain the integrity of the securities markets. The commission

regulates the issuance and trading of publicly-held securities.


The SEC requires filing of several forms including annual financial report (10-K),

quarterly financial report (10-Q), registration statement for newly-offered securities

(S-1, S-3), current reports of material event or changes (8-K), and others. These

forms are publicly available on internet in a database called the electronic data

gathering, analysis and retrieval system (EDGAR). A tutorial on how to use EDGAR

is at www.sec.go.gov/edgar/quickedgar.com

Form 10-K is particularly useful in analyzing a corporation because it contains

information that sometimes does not appear in the annual report to stockholders. For

example form 10-K contains a detailed describtion of teh business and its properties,

a describe of executive compensation, and description of management control.

Find the latest form 10-K of your corporation and answer the following questions:

1. What is the date of the lastest form 10-K?

2009 (annual report 2009)

2. What is primary standart industrial classification (SIC)?

Industrial Sector: infrastructure, utilities & transportation (7)

Industri Sub Sector: Energy (71)

3. The central index key (CIK) is a unique number assigned to corporatons that

file with the SEC. What is the corporation’s CIK?

PGAS

II.THE PRIMARY FINANCIAL STATEMENT

A. INCOME STATEMENT

The income statement (sometimes called the “statement of earnings” or “

statement of operations”) is usually the first major financial statement appearing

in the report. The income statement summarizes corporate revenue and expanses

for period time. Corporation provide three years of income statement for the

comparative purposes (if the corporation has been in operation of three years).

Growth in Revenue and Profits Revenue growth is determined by the

percentage increase (decrease) of revenue in comparison with the previos year:


http://www.sec.go.gov/edgar/quickedgar.com

Indicate the growth in the revenue during the curent year:

18,024,278,937,525 – 12,793,848,602,673 = 40,88%

12,793,848,602,673

1. Corporations are required to show summarized historical data. Label the

vertical axis of the following chart with a scale will accommodate revenue

over the last three years. Then the chart the level of revenue for the last five

years.

2005 2006 2007 2008 2009

4,457 5,433

6,632

12,793

18,024

Revenue in billions RupiahRevenue in billions Rupiah

2. Did revenue increase or decrease over the last few years? An explanation of

the change in revenue is often contained in management discussion and

analysis section. What reason did management give for the change?

Answer:

Revenue was increase over the last years. This was drived from their three

business segments gas distribution, gas transmission and fiber optic lense:

- Distribution revenue up by 45% with volume rose by 37%

- Transmission revenue up by 7% with volume up by 1%

- Lease of optic capacity

3. Trends in corporate profit are determoned by calculating the percentage of

increas (decrease) in income from continuingg operations over the previous

year. Income for continuing opeations is net income without the effects of

any discontinued operatios or extraordinary items.


Percentage of Revenues Growth

= (Current year revenue - Previous year revenue)

Previous year revenue

Answer:

Determine the percentage growth in profits during the current year (in million

rupiah).

6,229,043 – 633,860 = 882,72%

633,860

In 2009, PNG generate a net income of Rp 6,23 trillion, a sharp increase of

833% compared to that 2008.

Common- Size Analysis

Common- Size (percentage) analysis expresses items in a financial statement as a

percentage of a single item. this analysis permits comparison between two or

more years, or between two or more corporations. In an income statement, items

are usually expressed as a percentage of revenue. Perform Common- size

analysis in relation to revenue for the following items in the income statement.

Current year % Previous year

Revenue 18.024.278.937.

525

100 12.793.848.602.673 100

Cost of Goods/ Services 12.793.848.602.673 71% 5.227.443.734.194 41%

Gross profit 10.804.287.081.764 60% 7.566.404.868.479 59%

Operating Expanse 3.128.261.379.124 17% 2.909.153.082.859 23%

Interest Expense 558.262.115.674 3% 547.212.033.095

Other Income (Expenses) 571.146.651.527 3% 3.375.761.461.429 26%

Tax Expense 1.814.303.974.948 10% 476.266.931.177

Income for Continuing

Operations

0%

Net Income 6.229.043.496.319 35% 633.859.683.713


Pecentage Growth in Profit

= Current year income from contibuing operations – previos year income from continuing operation

previos year income from continuing operation

Based on your Common- Size Analysis, compare current year operating results in

terms of cost control, debt servicing, tax burdens, and profitability. Information

concerning the reasons for change may be found in the managemnet discussion

and analysis.

1. Product or Sevices Cost Control- Did the percent of product costs (cost of

goods or services) to revenue change in the current year in comparison to the

previos year? What are possible explanations for changes, if any, that may

have occured?

Answer:

Yes, the percentage of product cost to revenue changed (increase) in current

year in comparison to the previous year. Cost of Revenues in 2009 consists of

gas purchases from suppliers amounting to Rp7.22 trillion and service of

leased line from subsidiary (PGASCOM) amounting to Rp357 million. The

cost increased 38% or Rp1.99 trillion from Rp5.23 trillion in 2008 to Rp7.22

trillion. This increase of Cost of Goods Sold was due to the rising gas

purchase prices and a higher volume of gas supplies. The increased gas

supply came mainly from Pertamina and ConocoPhillips though the SSWJ

pipeline.

2. Operating Cost Control- Did the percent of operating expense (selling and

administrative expenses) to revenue change in the current year in comparison

to the previos year? What are possible explanations for changes, if any, that

may have occured?

Answer:

Yes, the percentage of the operating cost to revenue chanaged (increase) in

current year in comparison previous year. PGN’s Operating Expenses

increased by 8% to Rp3.13 trillion in 2009, driven mainly by a 25% increase

in General and Administrative Expenses to Rp1.02 trillion, while there was a

relatively slight increase of 1% in Distribution and Transportation Expenses,

which rose to Rp2.11 trillion.

3. Debt Servicing- How did the percentage of interest expanse to revenue

compare to the previous year? What are possible explanations for the

changes, if any?

Answer:


PGN booked Total liabilities of Rp15.89 trillion at the end of 2009, which

comprised 23% of current liabilities and 77% of noncurrent liabilities. The

total liabilities value fell Rp1.59 trillion or 9% from Rp17.48 trillion at the

end of 2008. This decline in liabilities was due primarily to a decline in non-

current liabilities of Rp2.02 trillion or 14% from the year-end 2008 position

of Rp 14.18 trillion.

4. Tax Burden- Did the tax expence as a percentage of total revenue change in

the current year? What are possible exlanations for these changes, if any?

(without knowledge of the tax laws appling to the corporation, it may be

impossible to determine specific reason for the change).

Answer:

Yes, the tax expense were increase because of increasing revenue and impact

to tax of income.

5. Profitability- How did net income as a percentage of revenue change in the

current year? What items in the income statement explain the change in

income from continuing operatings as a percentage of revenue?

Answer:

PGN reported an increase in Net Income of 883 % in 2009 to Rp6.23 trillion.

This was largely attributable to the increase in Revenues in line with the

growth in natural gas distribution sales volume of 37% to 792 MMScfd, and

gains on foreign exchange of Rp1.24 trillion, due to the strengthening of the

Rupiah against the US Dollar and the Japanese Yen.

B. BALANCE SHEET

The balance sheet summarizes assets and equities (liabilities and stockholder’s

equity) of a corporation. Assets are usually grouped in one of five categories:

current assets, investment, fixed assets (sometimes referred to as property, plat,

and equipment), intagible assets, and other assets. Liabilities are typically

grouped into current liabilities and long-term liabilities.

Asset Growth

The “size” of a corporation is commonly measured by the amount of total assets

on the corporation’s balance sheet. A corporation is considered “growing” if total


assets increase from one year to the next. The rate of growth is measured by the

change in total assets devided by the total assets of the previous year:

1. Determine the percentage of growth in assets

28,670,439,792,000 – 25,550,580,441,639 = 12,21%

25,550,580,441,639

2. Did total assets increase or decrease? What werw the primary reason for the

change in total assets?

Answer:

Total assets was increase than previous year. This total asset value

represented an increase of Rp 3,12 trillion or 12% from Rp 25,55 trillion in

2008, which was driven largely by the increase in curent assets of 78% to Rp

9,26 trillion.

Common- Size Analysis

In the balance sheet, common- size analysis is performed by expressing accounts

as a percentage of totalassets. These percentages are often compared to the

percentage of previous or to the percentages calculated for another corporation in

the same industri. Complate the common- size analysis for the following items in

the balance sheet.

Current Year % Previous Year %

Current Assets 9.263.400.994.474 32% 5.196.657.527.285 20%

Long- term Investment 0% 0%

Fixed Assets 19.407.038.797.52

6

68%

20.353.922.914.354 80%

Intagibles 0% 0%

Other Assets 0% 0%

Total Assets 28.670.439.792.00

0

100%

25.550.580.441.639 100%

Current Liabilities 3.729.795.011.315 13% 3.297.977.346.109 13%


Percentage

Growth of Assets

= (Current year total assets- Previous year total assets)

Previous year total assets

Total Liabilities 15.892.626.383.61

7

55%

17.480.499.661.543 68%

Stockholders’ Equity 11.732.080.390.25

3

41%

7.075.257.169.426 28%

Curret year (2009)

Current Assets/Total Assets 9.263.400.994.474/28.670.439.792.000 32,31%

Current Liabilities/Total Liabilities 3.729.795.011.315/15.892.626.383.617 23,47%Liabilities/Total Assets 15.892.626.383.617/28.670.439.792.000 55,43%Equity/Total Assets 11.732.080.390.253/28.670.439.792.000 40,92%

Previous year (2008) Current Assets/Total Assets 5196657527285/25.550.580.441.639 20,34%Current Liabilities/Total Liabilities 3297977346109/17.480.499.661.543 18,87%Liabilities/Total Assets 17480499661543/25.550.580.441.639 68,42%Equity/Total Assets 7075257169426/25.550.580.441.639 27,69%

3. Which balance sheet accounts changed the most comparison to the previous

year? What events explain the reason for the changes in these accounts?

Answer:

a. PGN’s current assets grew 78% to Rp 9,26 trillion in 2009. This was

mainly attributable to a 88% increase in cash and cash equivalent and 4%

increase intrade receivable.

b. PGN booked Total liabilities of Rp15.89 trillion at the end of 2009, which

comprised 23% of current liabilities and 77% of noncurrent liabilities.

The total liabilities value fell Rp1.59 trillion or 9% from Rp17.48 trillion

at the end of 2008. This decline in liabilities was due primarily to a

decline in non-current liabilities of Rp2.02 trillion or 14% from the year-

end 2008 position of Rp 14.18 trillion.

a. Equity rose 66% or Rp4,66 trillion from Rp 7,08 trillion in 2008 tp Rp

11,73 trillion in 2009. This increase was largely dueto an increase in state

of Republic of Indonesia capital stock which was caused by the

conversion of DPP and the increase in retained earning.

C. CASH FLOW STATEMENT


The purpose of the cash flow statement is to provide information about cash

receipts, cash disbursements, and cash balances. The statement also summarizes

operating, investing, and financing activities of corporation.

1. Indicate the cash flows resulting from operating, investing, and financing

activities. Be sure to identify whether the cash flow is positive or negative.

Then indicate the change in cash, and the beginning and ending cash

balances:

Current Year Previous Year

Operating 6.952.934.696.174 3.778.938.944.245

Investing (1.824.353.065.582) (1.231.966.356.497)

Financing (1.297.276.698.413) (525.056.707.501)

Increasing (decrease) in cash 3.831.304.932.179 2.021.915.880.247

Beginning cash balance 3.499.801.390.503 1.232.204.290.922

Ending cash balance 6.593.237.069.338 3.499.801.390.503

2. What were the three most significant sources of cash?

Answer:

- Increasing in receipts from customer

- Increasing in revenue from operating activities

3. What were three most significant uses of cash?

Answer:

- Increase in payment to supplier

- Increase in payment operating expense and other operating activities

- Payment for fix assets, in relation to the completion of the transmision

pipeline buckle project by his subsidiary ( Transgasindo)

- Devident payment

4. Chart the net income and cash flow form operating over the last three years.

a. Label the vertical axis of the following chart with a scale that will

accommodate net income and cash flow from operations over the last

three years.


b. Mark the level of net income for each year with an X. Then, mark the

cash flow frm operations for each year with a *.

c. Connect the net income amounts with a line to indicate the trend. Then

connect the amounts of cash flow from operations with a dotted line.

2007 2008 2009 -

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

1,572,526 633,860

6,229,043

2,926,542 3,778,939

6,952,935

Net income and Cash flow from operation (in million)

Cash Flow OperationNet Income

5. Based on a comparison of the income statement to the statement of cash

flows, what caused the greatest differences between net income (loss) and

cash flow from operations?

Answer:

Increase in outgoing cash flow from operating activities was caused pricipally

by an increase of 8% in payment supplier and increase of 27% in payment for

operating expenses and other operating activities.

D. STATEMENT OF TEH CHANGES IN THE STOCKHOLDERS’

EQUITY

The statement of changes in stockholders’ equity explains the changes in

individual equty accounts during the year. Most annual reports show the statement of

changes in stockholders’ equity as a formal financial statement; however, some


corporations show the statement of stockholders’ equity in the notes of the financial

statements. If the retained earnings are the only capital account that changed during

the fiscal year, a statement of changes in retained earnings is usually presented

instead.

Shares Outstanding

Label the vertical axis of the following chart with a scale that will accomodate

number of shares over the last three years. Then chart the numer of common shares

outstanding over the last three years.

2007 2008 2009

4,146

8,594

11,009

Volume of Shares (in millions)Volume of Shares (in millions)

Did the number of common share increase, decrease, or remain constant? What were

the reason, if any, for the changes?

Answer:

For three years, the number or volume of common share was increase. That because,

Stock split of nominal value of Series A Dwiwarna share and Series B shares from

Rp500 per share to Rp100 per share resulting to an increase in the Company’s share

from 14 billion shares to become 70 billion shares and increase in issued and fully

paid capital from 4,593,437,193 shares to become 22,967,185,965 shares.


Retained Earning

Record the amounts in the statement of changes in stockholders’ equity for the

following items:

Current Year (in rupiah) Previous Year (in rupiah)

Beginning Retained Earnings

(Unappropriated)

5.595.183.813.218 117.091.796.612

Devidends (if any) (1.000.000.000.000) (786.282.470.324)

Net Income (Net Loss) 6.229.043.496.319 633.859.683.713

Other Items


Ending retained Earnings

(Appropriated)

2.427.650.973.042 2.679.868.791.329

III. NOTES AND SUPPORTING SCHEDULES TO THE FINANCIAL

STATEMENTS

The notes and supporting schedules to the financial statements are located after

the financial statements in the annual report. Notes, sometimes called “footnotes”,

provide additional explanations, descriptions, and supporting information not

conveniently displayed within the body of the financial statements.

In experienced financial statement users sometimes regard the notes as

unimportant. However, most of the information contained in the notes are required

by GAAP and can make a difference a difference in a decision the financial

statement users concerning the corporation. For example, a contingent liability

considered “reasonably possible” may be shown in the notes rather than the liability

section of the balance sheet. A financial statement user who ignores the notes would

not be aware of contingencies that may affect the corporation in the future.

The first note in an annual report usually summarizes the significant accounting

policies used by the corporation when preparing the financial statements. This note is

generally followed by notes addressing more specific topics.

Some of the following topics may not apply to the corporation you selected. For

example, if the corporation does not have a pension plan, there is no need for a

pension plan note. If note is not applicable write “NA” in the blank.

Cash and Cash Equivalents Corporation often report “cash equivalents” along with

cash on the balance sheet (FSA 95, IAS 7). Cash equivalent usually include short-

maturity deposits and liquid saving accounts. How does the corporation define their

cashequivalents?(cash equivalents, cash, liquid*)

Answer:

- Cash : Bank (Rupiah, Dollar, Yen)

- Cash Equivalent : Time Deposito (Rupiah, Dollar, Yen)


Account Receivable Corporations with receivable must disclosed the net amount

due and any allowance for amounts deemed uncollectible. The percentage of

uncollectible is calculated by dividing the allowance for uncollectible by the gross

accounts receivable. Gross accounts receivable are net receivable before the

allowance for uncollectible is removed.

Answer:

The Company provides an allowance for doubtful accounts based on the periodic

review of the status of the individual receivable accounts with certain conditions as

follows:

a. Based on regular report from the district operational division, the Company

provides a full allowance (100% of outstanding balance) for the customers whose gas

meter is completely stopped and a partial allowance (50% of outstanding balance) for

the customers whose gas meter has been closed.

b. If at the end of the year, there is no information from operational division about

the customer whose receivables already exceeded the normal credit terms, the

Company provides allowance for doubtful

accounts using the aging receivables report as follows:

- Allowances of 25% for the customers receivable with age more than three months

up to six months;

- Allowances of 50% for the customers receivable with age more than six months up

to one year; and

- Allowances of 100% for the customers receivables outstanding for more than one

year.

The receivable turnover ratio is an indication of the number of times a year the

corporation collects its account receivables. The ratio is determined by dividing

credit sales by the average accounts receivables. Average accounts receivable is

usually determined by dividing beginning and ending accounts receivable by two.

receivable turnover= credit slesaveragereceivables

compute the receivable turnover ratio for the corporation in the current year and

previous year. If credit sales are not available, assume that all sales are on credit.


Beginning accounts receivable for the previous year may be unavailable in the

current annual report. The amount is easily obtained from a previous year annual

report (for example, form 10-K on EDGAR at www.sec.gov )

Current year

33 days = 11 times

Previous year

39 days = 9,3 times

How did the receivable turnover ratio change from the previous year to the current

year? What are the implications of this change? (account receivable, uncollectible,

bad debt)

Answer:

At the end of 2009, the company’s collection period improved from 39 days in 2008

to 33 days in 2009. This improvement was dominat to additional gas sales absorbed

by good creditworth customers.

Inventories Material classifications of inventories must be itemized on the balance

sheet or in a corresponding note (ARB 43, Chapter 3, Paragraph 15; IAS 2). Is the

inventory classified into more the one category? If so, what are those categories?

Answer:

Inventory Consist of:

- Technical spare parts

- Allowance for inventory obsolescence

The inventory flow method [for example, first-in, first-out (FIFO); average ; or last-

in, last-out (LIFO)] selected by a corporation can significantly affect the amount

allocated to inventory on the balance sheet and cost of good sold on the income

statement.

A corporation is required to disclose flow method(s) used to value its inventory

(ARB 43, Chapter 3A, Paragraph 9). In some cases, the corporation will value


foreign and domestic inventory groups in different ways. What method(s) is (are)

used to account for inventories? Inventory, last-in, first-in, first-out)

Inventory Group Inventory Flow Method

Domestic Inventory : Moving average method

Foreign Inventories : Moving average method

If the corporation uses a FIFO flow method, it must disclose the LIFO reserve, which

is the difference between the LIFO inventory amount and the current value or FIFO

inventory amount typically used for internal reporting, If the corporation uses LIFO

to value the inventory, indicate the following for current year:

2009 2008

Inventory using FIFO (as shown on

the balance sheet)

Rp 14.120.479.466 Rp 14.521.800.031

LIFO Reserve Rp 491,877,318

(Rp 67,293,102)

Rp 263,972,253

(Rp 5,937,624)

Inventory at Current Cost / FIFO /

Replacement Cost

Rp 2,995,659,043 Rp 2,571,074,827

The inventory ratio indicates of the number of times a year the corporation sells its

inventory during a year. It is determined by dividing cost of sales by the average

inventory. Average inventory is determined by dividing the sum of beginning and

editing inventory by two.

Inventory Turnover = Cost of Sales/ Average Inventory

Compute the inventory turnover ratio for the corporation in the current and previous

year. If beginning inventory for the previous year is not available in the current

annual report it may be obtained from a previous year annual report.

Answer:

Current years (2009)


Inventory Turnover = Cost of Sales/ Average Inventory 7.219.991.855.761 / (14.120.479.466+14.521.800.031)/2 126 2,86 times

Previous years (2008)Inventory Turnover = Cost of Sales/ Average Inventory 5.227.443.734.194 /( (14.521.800.031+20.840.219.937)/2) 296 1,22 times

Property and Depreciation if material separate categories of property, plant, and

equipment should be disclosed. Identify the categories of property, plan, and

equipment. Corporations must also disclose the depreciation method(s) used to value

property, plan, and equipment (APB 12, IAS 16). In some cases, the corporations

will use more than one depreciation method, What method(s) is (are) used to

depreciate property, plan, and equipment? (Buildings, machinery, equipment, land

depreciation, straight-line, accelerated)

Fixed Asset Group Depreciation Method Years %

Property, Plant and Equipment - - -

- Buliding and improvements Straight- line method 20 5%

- Machineries and equipment Double – decline balance method 16 – 20 10% - 12,5%

- vehicles Double – decline balance method 4 – 8 25% – 50%

- office equipment Double – decline balance method 4 – 8 25% – 50%

- Furniture and fixture Double – decline balance method 4 – 8 25% – 50%

- Unistalled assets Double – decline balance method 16 12,5%

Impairment of fixed assets occurs when the market value of an asset is significantly

lower than the carrying amount and the amount is not considered recoverable. Losses

resulting from impairment of long-lived assets must be charged against income (FAS

121 and 144, IAS 36). Were any assets recognized as impaired during the current

year? If so, what was the nature of the impaired assets and the amount charged

against income to recognize the impairment? (Impairment)


Answer:

Based on the assessment of the management of the Company and Subsidiaries, there

are no events or changes in circumstances which may indicate impairment in the

value of property, plant, and equipment as of December 31, 2009 and 2008.

An approximation of the remaining usefulness of property, plant, and equipment may

be determined by computing the percentage that assets are depreciated. The ratio is

calculated by dividing accumulated depreciation by the gross depreciable fixed

assets. Depreciable fixed assets do not include land or construction in progress.

(Fixed assets worksheet)

Percentage of Fixed = Accumulated Depreciation

Asset Depreciation Gross Depreciable Fixed Assets

Calculate the percentage of fixed asset depreciation for the corporation in the current

and previous year.

Current years = Depreciation / Depreciable Fixed Assets

Rp3.612.986.539.356 / 11.572.970.230.701

0.312

Previous years = Depreciation / Depreciable Fixed Assets

Rp2.363.461.529.689 / 11.834.592.834.610

0.199

How did the percentage of fixed asset depreciation change from previous year to the

current year? What might be the reasons for this change? What are the implications

of this change for the future?

Answer:

Depreciation expenses remained as the largest Operating Expense component,

amounting to Rp1.62 trillion or 52% of the total Operating Expenses. Depreciation

Expenses show a tendency to decline compared to the previous year because PGN

uses the double declining balance method. Its because:

- The additions to construction in progress include capitalized borrowing costs

amounting to Rp25,321,749,365 and Rp38,022,495,312 for the years ended

December 31, 2009 and 2008, respectively.


- The deductions from and additions to property, plant and equipment for the

years ended December 31, 2009 and 2008, also included adjustments from the

difference in foreign currency translation of the financial statements of a

Subsidiary, amounting to Rp703,325,341,574 and Rp692,566,384,814,

respectively. Depreciation charged to operations amounted to

Rp1,620,832,819,601 and Rp1,712,398,934,170 for 2009 and 2008, respectively.

- Transgasindo execute the pipeline through cut and replace of 23 km along

certain area of Kuala Tungkal-Panaran on the Grissik-Singapore pipeline. To

better reflect the economic useful life of such pipeline being cut and replaced,

Transgasindo changed the estimated economic useful life of such assets by

accelerating its depreciation applied from July 2008 up to June 2009, the

expected completion date of buckle project. In 2009, the cutting process was

already completed. This accelerated depreciation resulted in an increase in

depreciation expense of Rp74,856,045,696 (equivalent to USD7,723,488), which

also resulted in decrease in deferred tax expense and deferred tax liability of

Rp20,328,223,800 (equivalent to USD2,162,577) in 2009 and Rp25,371,653,700

(equivalent to USD2,317,046) in 2008, respectively.

The fixed asset turnover ratio indicates how efficiently fixed assets are used to

generate revenue, The ratio is particularly useful in a capital intensive corporation

which plant and equipment are used to generate revenue. The ratio is calculated by

dividing revenue by the fixed assets held during the year.

Fixed Asset = Revenue

Turnover Ratio Average Net Fixed Assets

Compute the fixed asset turnover ratio for the corporation in the current and previous

year, If beginning fixed assets for the previous year is not available in the current

annual report, it may be obtained by from a previous year annual.

Current years = Revenue / Average Fixed Assets

Rp18.024.278.937.525 / 19.407.038.797.526

0.928

Previous years = Revenue / Average Fixed Assets

Rp12.793.848.602.673 / 20.353.922.914.354


0.628

Capitalized Leases Some corporations lease, rather than purchase, fixed assets.

Capitalized leases (referred as “finance leases in international standards) transfer the

benefits and risks of ownership to lessee. An asset and a liability approximately

equal to the present value of the rental payments is recorded. The asset associated

with a capital lease is periodically amortized in the same way that owned assets are

depreciated. In addition, the lessee will make rental payment that consist of interest

and principal (FAS 12, IAS 17) if the corporation uses capital leases (lease,

capital(ized)) lease, lease obligation, imputed interest) (Leases worksheet): Answer:

nothing note which explain leases account and output in this company.

Operating Lease Operating are legal obligations that require the corporation to

make periodic payments for several years. These leases do not require recording of a

long-term asset or liability. However, GAAP requires disclosure of the payments

over the life of the lease. Answer: nothing lease process and output in this company.

Long-term Debt Long-term debt usually organized by type of lender, for example.

Loans from banks and bond issues are usually grouped separately. Corporation

disclose interest rates, due rates, collateral, and loan covenants of long-term debt.

What long-term debt obligations does tge corporation have? If the corporation has

more than five debt instruments, list the five largest. (debt, credit facility, loan,

maturity).

Instrument

(two-step loan)

Rate (annual) Amount

Japan Bank for International Cooperation 0,75% – 0,95% 4.465.473.203.982

Asian Development Bank -2,01% - 5,84%

-3,43% - 6,32%

805.977.135.430

European Investment Bank - 4,35% - 7,41%

- 4,95% -5,29%

668.433.900.457

International Bank for Reconstruction and

development

- 2,11% - 3,52%

- 3,33% - 5,80%

394.420.719.400

Japan Bank for International Cooperation - 1,66% - 2,85% 393.661.623.622


- 3,08% - 5,61%

International Bank for Reconstruction and

development

-1,61% - 2,74%

-3,51% - 5,23%.

18.339.673.728

Standard Chartered Bank, Singapore Libor + 3,10% 2.585.000.000.000

PT Bank Negara Indonesia (Persero) Tbk Sibor +1,75% 1.410.000.000.000

Total Amount 10.741.306.256.619

Debt payments for each of the next years must be disclosed. In which of the next

years is the long-term due?

Answer:

Year 2012 Amount to be paid Rp 306.117.324.467

Pension Plans A pension plan is usually the most significant of all post-retirement

benefits. In general, these plans are classified as:

Defined Contribution Plans (for example, 401(k) plans) – The employer

makes periodic payments to employees to be placed into designated

retirement account. No promise is made concerning the amount available to

the employee retirement.

Defined Benefit Plans – The employer promises a specified amount (usually

based in ending salaries and years of services) to retired employees.

Both defined benefit and defined contribution plans have associated expenses. If the

corporation has either of these type of plans, what was the pension expense (benefit)

associated with the plan(s) for the current year? (pension, benefits, retirement,

defined contribution, defined benefit)

Defined Contribution Pension Expensen and Defined Benefit Pension Expense

(Benefit):

Kind of Pension Programs Amount

PT Asuransi Jiwasraya (Persero) Rp41,573,407,614

Yayasan Kesejahteraan Pegawai Perusahaan Umum Gas

Negara

Rp18,882,961,370 and

Rp17,903,892,202,

Defined Contribution Pension Plan Rp14,928,558,872

Long-term Employee Benefits Rp 194.490.456.393


Corporation with defined benefit plans are required to disclose an estimate of the

cumulate obligation owed by the pension plan (FSA 87, 132R, 158; IAS 19,26). The

benefit obligation is the present value of the benefits owed to current employees

based on their expected future salaries. How much is the benefit obligation at the end

of the current year?

Answer:

Rp 274.745.780.498

Based on a comparison of the obligation and the assets of the plan(s), would you say

the plan(s) is (are) adequately funded? Why or why not? (Retirement worksheet)

Answer:

The company has allocated assets to guarantee the employee pension plan.

What was the cash amount contributed to the defined benefit pension plan during the

current year?

Answer:


Rp 289.382.249.286

What was the amount of defines benefit pension benefits paid to retirees during the

current year?

Answer:

Rp 274.745.780.498

What types of investments are the defined benefit pension funds?

Answer:

The management of the Company is of the opinion that the existing retirement

insurance plan and the Company’s policy regarding retirement benefits are

adequately cover the benefits required under the Law No. 13/2003. Transgasindo

recorded employee benefits expense based on internal computation amounting to

Rp2,012,724,424 and Rp2,784,120,629 for the years ended December 31, 2009 and

2008, respectively, and recorded estimated liability for employees benefits of

Rp12,642,008,624 (USD1,344,895) and Rp10,629,284,200 (USD970,711) as of

December 31, 2009 and 2008, respectively. PGNEF, PGASKOM and PGASSOL did

not accrue for employee benefits as of December 31, 2009 and 2008 since the

amount is immaterial.

Income Taxes Income tax expense is often one of the largest expense categories on

the income statement. Income tax expense is determined by applying a tax rate to the

portion of income taxed. However, governments may allow payment of certain taxes

to be deferred to later years. Deferred taxes result from differences between the way

net income and taxable income determined. GAAP requires corporation to disclose

(either in a note or on the financial statement) the current tax expense and the amount

of taxes deferred to a later year (FAS 109). (income tax, tax(es), deferred tax, IAS

12)

What was the income tax expense (or provision) for the current year appearing in

the income statement?

Answer:

Rp 1.179.792.143.604


What portion of the current year’s income tax expense (federal, state, and

international) has been deferred to future periods (Prepayments of income taxes)?

Answer:

Rp 1.149.557.219.511

The effective tax rate is determined by dividing taxable income into the tax expense.

What was the effective tax rate for corporation for the current year? (effective tax

rate, statutory)

Answer: 5 %

Deferred tax assets and liabilities result from differences between corporate

accounting and the determination of taxable income. What amount is disclosed in the

note as:

Gross deferred tax asset Rp 112.265.592.367 Circle One:

Gross deferred tax liability Rp 56.091.570.036 Asset

Net deferred tax amount Rp 56.091.570.036 Liabilities

What significant activities resulted in recognition of deferred tax liabilities that are

not yet due to a tax authority?

Answer:

Transgasindo execute the pipeline through cut and replace of 23 km along certain

area of Kuala Tungkal-Panaran on the Grissik-Singapore pipeline. To better reflect

the economic useful life of such pipeline being cut and replaced, Transgasindo

changed the estimated economic useful life of such assets by accelerating its

depreciation applied from July 2008 up to June 2009, the expected completion date

of buckle project. In 2009, the cutting process was already completed. This

accelerated depreciation resulted in an increase in depreciation expense of

Rp74,856,045,696 (equivalent to USD7,723,488), which also resulted in decrease in

deferred tax expense and deferred tax liability of Rp20,328,223,800 (equivalent to

USD2,162,577) in 2009 and Rp25,371,653,700 (equivalent to USD2,317,046) in

2008, respectively.


What significant activities led to the recognition of deferred tax assets that will be

utilized in the future?

Answer:

The differences in the basis of allowance for doubtful accounts, allowance for

inventory obsolescence, provision for employees’ bonus and allowance for

employees’ benefits are due to the difference in timing of recognition of expenses for

accounting and tax reporting purposes. Based on the review of the adequacy of the

valuation allowance at the end of the year, the management is of the opinion that the

valuation allowance for deferred tax assets is adequate to cover the possible that such

tax benefits will not be realized.

Stock-Based Compensation Stock-based or share-based compensation plans are

implemented as an incentive to perform in manner that increase the value of the

corporation (and, thus, increase the market price of the stock). GAAP requires a

disclosure of these plans and their financial effects (FAS 123R, 1FRS2). (incentive,

options, stock-based compensation, share-based compensation may) Forms of stock-

based compensation may include:

Stock Options – Opportunity to purchase shares of stock at a guaranteed

price for a specified period of time.

Restricted Stock – Stock of a corporation that is not transferable to the

employee until conditions (usually the passage of time) have been met.

Stock Appreciation Rights – Cash payment (or sometimes share delivery)

based on the increase in the value of a stated number of shares over a

specified period of time.

Stock savings plan – employees are given shares of stock to place in a

savings plan, usually a deferred tax retirement plan

Stock Purchase Plan – employees are permitted to purchase corporation

stock, usually at a discount not available to non employees

Options are considered outstanding if they are granted by the corporation, but not

yet exercised, cancelled or expired. If the corporation has a stock option plan, how

many shares may be purchased by outstanding options and what is the average

exercise price?


Options to purchase 54,012,338 shares were outstanding at the end of the current

year at an average exercise price of Rp9.700 per share.

Options are exercisable when they are held for an appropriate period and are now

eligible for purchasing stock. If the corporation has a stock option plan, how many

shares may be purchased by options that are exercisable? What is the average

exercise price of these options?

Answer:

The exercise price of option to purchase one new Series B share is in accordance

with the regulation in the Attachment 1-A of the Jakarta Stock Exchange Board of

Directors’ Decision No. 305/BEJ/07-2004 dated July 19, 2004.

During the current year:

Rp 53.551.388 shares were purchased by exercising options.

Rp 460.950 shares were no longer available for exercise because the

options expired or canceled.

What is the expense associated with the issuance of the options for the current year?

Answer:

Rp 562.425.299.521

What is the expense associated with the issuance of restricted shares for the current

year?

Answer:

capital-stock option: Rp 156.423.604.348

Forfeited employees stock option: Rp 1.346.434.950

Segmental and Geographic Information GAAP (FSA 131, IFRS 8) requires

identification of key information concerning operating segments. In addition, if the

corporation operates in several geographic areas, information concerning the

financial results of major geographic area should also be reported. If the corporation


discloses disaggregated information, indicated the primary business and/or

geographic segments (segment, geographic):

Operating Segments Geograpic Areas

Gas Distribution distribution of natural gas to industrial, commercial,

residential

customers and Fuel Gas Filling Stations (SPBG).

Gas Transmission gas

transmission services from the Grissik-

Duri, Grissik-Singapore, Medan, and

Jakarta sections. The principal customers

for transmission network leasing are

ConocoPhillips, Petro China, PLN Medan,

and Pertamina.

Lease of Fiber Optic

Capacity

provision of fiber optic networks

to customers, principally PT Excelcomindo Pratama

Contingencies Contingent liabilities are financial obligations that depend on the

occurrence (or nonoccurrence) of future events. Disclosure of these obligations

depends on whether or not the future event is probable, reasonably possible, or

remote (FAS 5, IAS 37). For example, if closing a $2,000,000 lawsuit is probable,

the amount is shown as a liability and an expense and the lawsuit is described in a

note. If the loss of the lawsuit is reasonably possible, no liability is recognized;

however, the lawsuit is a describe in a note. Remote losses need not be disclosed.

Identify any contingencies that potentially affect the financial position of the

corporation. Are these contingencies probable or reasonably possible? Were any of

the contingencies reported as an expense on the income statement and a liability on

the balance sheet? (contingency(ies), legal, lawsuit)

Answer:

As of December 31, 2009, the Company had contingencies as follows:

a. The land covering the area along the 536 km natural gas transmission pipeline

from Grissik to Duri is still in the certification process. During the land certification


process, there have been disputes with several inhabitants of the land in Batanghari

and Tanjung Jabung used for the Grissik - Duri pipeline, who are claiming additional

compensation.

The Company is named as a Defendant in Case No.

04/PDT.G/2001/PN.MBLN which was filed by several inhabitants in Batanghari

(Plaintiff) at the Muara Bulian State Court on March 19, 2001, whereby the claim of

the Plaintiff was rejected based on the Court Decision dated June 26, 2001. The

Plaintiff appealed to the Jambi High Court, and based on the Decision No.

47/Pdt/2001/PT.JBI of the Jambi High Court dated November 27, 2001, the appeal

was rejected by the High Court. However, the Plaintiff appealed to the Supreme

Court. Up to March 23, 2010, the examination by the Supreme Court is still in

progress. The Company is also named as one of the Defendants in Case No.

06/PDT.G/ 2001/PN.KTL which was filed by some inhabitants in Tanjung Jabung

(Plaintiff) on November 15, 2001 at the Kuala Tungkal State Court. Based on the

decision of the State Court dated April 22, 2002, the Plaintiff’s claim was rejected,

and the Plaintiff appealed to the Jambi High Court. Based on Decision No.

31/PDT/2002/PT.JBI, dated August 14, 2002, the Jambi High Court affirmed the

Kuala Tungkal State Court’s decision, and the Plaintiff appealed to the Supreme

Court. Up to March 23, 2010, the examination by the Supreme Court is still in

progress.

b. The Company is named as one of the Defendant I in Case No.

01/Pdt.G/2004/PNBU dated December 3, 2004 field to the Blambangan Umpu State

Court, Tanjung Karang, Lampung regarding dispute of 4,650 Ha land’s ownership

located in Kecamatan Negeri Besar, Kabupaten Way Kanan, at which the Company’s

pipe passed through. This claim was filed by Hj. Raden Intan GLR. ST Sipah Muda

as the Plaintiff for Hj. Sarbini as Defendant I, M. Jaya Saputro as Defendant II, the

Company as Defendant I, and committee of land procurement as Defendant II. In the

examination process, there was intervention from Hi. Alimuddin Ismail as

intervention Plaintiff. The Court verdict decided that intervention Plaintiff is the

owner of disputed land. This decision was cancelled by Tanjung Karang High Court

based on Decision No. 30/Pdt/2006/PTTK dated December 15, 2006. However,

Alimuddin Ismail appealed to the Supreme Court.


c. On September 29, 2005, the Company received court’s call for case No.

350/Pdt.G/2005/PN.Mdn, filed by Damir Lubis (Plaintiff) to the Medan State Court

for the land and employee’s housing that belongs to the Company, located at Jl.

Kom. Laut Yos Sudarso No. 269, Medan. Based on the verdict dated October 2,

2006, the State Court rejected all of the Plaintiff’s claim and charged court expense

to the Plaintiff.

d. On May 15, 2006, the Company as one of the Defendant together with

Transgasindo, received court’s call for case No. 01/Pdt.G/2006/PN.MBLN, filed by

Indra Kusuma and Asmara (Plaintiff) to Jambi’s Muara Bulian State Court for the

compensation of land in Jambi.

e. The Company is in dispute with one of its customers, PT KHI Pipe Industries

(KHI) relating to the delay of pipe supply by KHI for pipe gas transmission project

based on the agreement No. 002800.PK/244/UT/2005, dated June 16, 2005

(“Pagardewa – Labuhan Maringgai Agreement”) and Agreement No.

003800.PK/244/UT/2005, dated September 29, 2005 (“Muara Bekasi – Rawa Maju

Agreement”). The amount involved in the dispute amounted to USD5,000,000. Up to

March 23, 2010, the related claims are in the process of being filed to the Indonesian

National Board of Arbitration (BANI) for settlement.

f. The Company is in dispute with one of its contractors, Nippon Steel Corporation in

relation to the Nippon Steel Corporation’s Variation Request No. 002-VR-NSJ/PGN-

0017 amounted to JPY45,332,000 for Labuhan Maringgai Cilegon Offshore Pipeline

project based on the agreement No. 004600.PK/ 245/UT/2005, dated October 14,

2005, with contract amount of JPY16,500,000,000. Up to March 23, 2010, there is

no further development to this case.

g. The Company is in dispute with one of its contractors, PT Siemens Indonesia and

Siemens Pte Ltd., (Siemens Consortium) relating to the 13 Variation Order Request

(VOR) claims amounted to USD5,304,987 for Gas Management System (GMS)

project based on the agreement No. 004100.PK/241/UT/2006, dated May 3, 2006,

with contract amount of USD5,904,802 and Rp9,557,971,391. Siemens Consortium

has filed this case to the Indonesian National Board of Arbitration (BANI) for

settlement. Based on this decision, the Company has paid its liabilities to Siemens

amounting to Rp8,056,566,595 and USD2,041,386 and received the payments from

Siemens amounting to Rp11,790,672,118 and USD248,952. The Company has


presented the difference of amounts as part of “Property, Plant and Equipment -

Construction In Progress” account the arbitration fees totaling to Rp1,000,022,240

and presented it as part of “Other Income (Expenses) - Others-Net” account in 2009

consolidated statement of income.

h. The Company is in dispute with one of its contractors, CRW Joint Operation,

which consists of PT Citra Panji Manunggal, PT Remaja Bangun Kencana

Kontraktor and PT Winatek Widita, relating to Dispute Adjudication Board (DAB)’s

decision, dated November 25, 2008, which decided that CRW Joint Operation has a

right to receive payment from the Company amounting to USD17,298,835, in

relation with gas pipeline transmission project in Grissik - Pagardewa, based on the

agreement No. 002500.PK/243/UT/2006, dated February 28, 2006, which was

amended with No. 002000.AMD/HK.02/UT/2008, dated October 24, 2008. Based on

the DAB’s decision, the Company has issued the Notice of Dissatisfaction, therefore,

CRW Joint Operation has filed this case to the International Court of Arbitration –

International Chamber of Commerce (ICC), Paris. Based on this decision, the

Company has recorded the arbitration fees totaling to Rp8,157,640,893 and presented

it as part of

“Other Income (Expenses) – Others - Net” account in 2009 consolidated statement of

income.

i. Transgasindo is named as one of the Defendant II in Case No.

09/Pdt.G/2009/PN.Ktl dated June 12, 2009 filed to the Kuala Tungkal State Court,

Jambi filed by PT Tamarona Mas International (Plaintiff) regarding dispute between

Plaintiff with MMC Oil & Gas Engineering SDN., BHD. (Defendant I) as the EPCC

contractor on Jabung Gas Booster Station Project.

The Plaintiff claims to the Defendant I to fulfill the payment regarding the project for

Site Preparation and Temporary Facilities, Provision of Earthwork and Associated,

Provision of Civil & Structural, Buildings and Associated Work and several variation

order completed by the Plaintiff amounting to USD986,079 and requested the Kuala

Tungkal State Court to foreclose several assets of the Defendants, including

Transgasindo’s asset as security. Based on Decision Letter of Kuala Tungkal State

Court No.09/PDT.G/2009/PN/.KTL, dated November 5, 2009, stated that the Kuala

Tungkal State Court has no an authority to examine and prosecute this case. Based

on this decision, the Plaintiffs appealed to the Jambi High Court dated December 14,


2009. Up to March 23, 2010, the appeals process is still in the process at the Jambi

High Court.

Interim (Quarterly) Financial Data Disclosure of quarterly data aids the financial

statement user in determining the seasonality of the corporate operations. For

example, American manufacturers of confectionery will typically experience much

higher sales in the quarter that includes the Halloween and Christmas holidays. Large

public companies are required by the SEC (Item 302 (a), Reg. S-K) to include

quarterly amounts for revenues, gross profit, net income, and net income per shares.

International standards also require interim reporting (IAS 37) (interim, quarterly)

(seasonality worksheet)

Chart the quarterly revenue for the corporation over the current year:

a. Label the vertical axis of the following chart with a scale that will

accommodate the quarterly revenue that occurred throughout the current

year.

b. Mark the level of revenue for each year with an X.

c. Connect the revenue amounts with a line to indicate the trend

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

4,477,803,473,563

9,005,241,679,655

13,513,804,435,731

18,024,278,937,525

Revenue (sales quarterly)

Revenue

Do you detect significant fluctuations in quarterly data for the corporation? If so,

explain the reasons for the fluctuation(s)?

Answer:


PGN reported an increase in Net Income of 883 % in 2009 to Rp6.23 trillion. This

was largely attributable to the increase in Revenues in line with the growth in natural

gas distribution sales volume of 37% to 792 MMScfd, and gains on foreign exchange

of Rp1.24 trillion, due to the strengthening of the Rupiah against the US Dollar and

the Japanese Yen.

IV. REPORT OF THE INDEPENDENT AUDITORS

Auditing is a process by which an independent accounting firm accumulates and

evaluates data to determine whether the financial statements are presented in

accordance with GAAP. The Securities and Exchange Commission requires an

annual audit for all companies whose capital stock is traded on a recognized stock

exchange.

The purpose of the audit report is to communicate the findings of the auditor to

financial statement users. The auditor’s report usually appears immediately after the

notes to the financial statements. Who is the corporation’s auditor and where is the

auditor located?

Auditor: Public Accountants Purwantono, Sarwoko & Sandjaja, a member

firm of Ernst & Young Global.

City where auditor is located: Indonesian Stock Exchange Building Tower

2, 7th Floor Jl. Jend. Sudirman Kav. 52-53 Jakarta 12190, Indonesia Tel : (62-21)

52895000 Fax : (62-21) 52894100 www.ey.com/id

Report on the Financial Statements An audit report usually consists of three parts

that (1) define the responsibility of management, (2) describe the nature of the audit,

and (3) express an opinion on whether the financial statements are fairly presented

and in conformity with generally accepted accounting principles. The following are

types of audit opinions that community in annual reports:

An unqualified opinion states that, in the auditor’s opinion, the financial statements

are in conformity with generally accepted accounting principles and that the auditor

is reasonably assured that the financial statements are free from material

misstatement.


A qualified opinion is issued when the auditor detects non-pervasive departures from

GAAP or non-pervasive scope limitations. A qualified opinion includes the words

“except for” in the paragraph in which the auditor expresses an opinion.

Disclaimer of opinion occurs when the auditor experiences severe limitations on the

scope of the audit or if a nonindependent relationship exists between the auditor and

the client. Each of these conditions makes it impossible for the auditor to express an

opinion on the financial statements. A disclaimer of opinion will clearly state that the

auditor does not render an opinion.

An adverse opinion is given only when the auditor believes the financial statements

are materially misstated or misleading. An adverse opinion will state specifically that

the financial statements do not in conform to GAAP.

Read the auditor’s opinion carefully, than answer the following questions concerning

the content of the opinion.

1. Place an X by the type of opinion expressed by the auditor:

□ Unqualified □ Disclaimer of opinion

□ Qualified □ Adverse opinion

2. An auditor’s report will state the responsibility of the auditor. What is the

responsibility of the auditor with regard to the financial statements?

Answer:

a. Auditors are responsible for preparation and the presentation of the

consilidate financial statement.

b. Auditors are responsible for the Company’s and Subsidiaries internal control

system.

3. What guidelines does the auditor use to conduct the audit?

Answer:

Financial report from PGN company.

4. Does the auditor believe the financial statements were presented fairly? What

statements in the audit opinion support your conclusion?


Answer:

Yes, they are. Auditors’s fairly statements are:

- All information has been fully and correctly disclosed in the Company’s

consolidated financial statements.

- The Company’s consolidated financial statement do not contain false

material informatin or fact, nor do they omit material information of facts.

Report on Internal Controls Internal control is the process of providing assurance

regarding the reliability financial statement preparation. The auditor is required to

express an opinion on the effectiveness of the company’s internal control over

financial reporting.

1. What authority provides the criteria for establishing internal controls?

Answer:

The Internal Audit Unit’s authority cover the following:

• Preparing and implementing the Annual Audit Work Program (PKAT).

• Testing and evaluating the implementation of internal controls and the risk

management system in line with Company policy

• Auditing and assessing efficiency and effectiveness in the fields of finance,

accounting, operations, human resources, marketing, information technology and

other activities.

• Providing suggestions for improvements and objective information regarding the

audited activities at all levels of management.

• Making reports on the results of the audits and submitting them to the President

Director and the Commissioners.

• Monitoring, analyzing and reporting on the implementation of remediation and

follow up in the areas suggested.

• Working with the Audit Committee.

• Preparing a program to evaluate the quality of the internal audits performed, and

• Conducting special audits if required.

2. Whose responsibility is it to maintain effective internal controls over financial

statement preparation process?

Answer:


The responsibilities of the Internal Audit Unit cover the following:

• The IAU is responsible for carrying out audits in accordance with the prevailing

audit standards and Code of Ethics, allocating audit resources effectively and

efficiently, improving the professionalism of auditors and implementing a quality

assurance program for the tasks and management of the Internal Audit Unit.

• The IAU is responsible for maintaining the confidentiality of data, documents and

information related to audit implementation and reporting the audit results in

accordance with the Company’s policy on confidentiality of information stipulated

by the Board of Directors and the Auditors’ Code of Ethics.

• The IAU must obtain the President Director’s approval for the work program and

audit development plans it prepares.

• The IAU must report any information related to the current audit to the President

Director.

• IAU Auditors are forbidden from taking on concurrent duties, including operational

activities or in a subsidiary.

3. Does the auditor believe the corporation maintained adequate internal control

over financial reporting? If not, in what areas were there internal control

deficiencies?

Answer:

Yes, they do, some of internal auditor are control the econimic system of the

company. In line with the 2009 Annual Audit Work Program, during fiscal year 2009

operational audits were carried out on 6 auditees: SBU I, II and III as well as the

Transmission SBU, Head Office and Projects, with the key recommendation being 3

EC, or Effectiveness, Efficiency, Economy and Compliance (with the prevailing

regulations and provisions).

V. RATIO ANALYSIS

Ratio analysis is a way to compare current performance and financial position to (1)

previous year, and (2) other corporations. Calculate the following ratios for your

corporation. You should show all of your calculations. In other words, indicate the


components of the numerator and denominator for each ratio. (The Ratio Analysis

worksheet will be useful throughout this section.)

A. ANALYSIS OF PROFITABILITY

Ratio of profitability indicate the degree of success of the corporation’s operations

during the year. Profitability ratios show the amount of resources required to

generate profits and the availability of profits to stockholders. These ratios are often

used as a means for stockholders to evaluate the performance of corporate

management.

1. Profit Margin

The profit margin on revenue shows the relation of profits to revenue. The

percentage is computed by dividing income from continuing operations by net

revenue for the year. Income from continuing operations is net income without the

effect of any discontinued operations or extraordinary items.

Profit Margin=Income¿Continuing Operations ¿Net Revenue

A higher profit margin indicates less revenue is needed to generate a desired level of

profit. Compute the profit margin on revenue for the current and previous years:


Profit Margin = Operating Income/Revenue

7.676.025.702.640 / 18.024.278.937.525

42,59%

Previous years (2008)

Profit Margin = Operating Income/Revenue

4.657.251.785.620 / 12.793.848.602.673

36,40%

2. Return on Assets

The return on assets (ROA) ratio indicates how well the assets of the corporation are

utilized to achieve a profit. The ratio demonstrates potential earning similar to the

way a savings account interest rate indicates how much you can earn on money


invested in savings. The percentage is computed by dividing income from continuing

operations by average total assets held over the year. Average assets are usually

computed by adding current year total assets to previous year total assets and

dividing by two.

Returnon Assets=Income ¿Continuing Operations for Current Year ¿(Current Year Total Assets+PreviousYear Total Assets ) /2

Total assets for the current and previous years appear on the balance sheet; however,

because a balance sheet typically shows only two years of data, previous year total

assets may appear in another section of the annual report. Compute the return on

assets for the current and previous year:


Return on Asset = Net Income/average total asets

6.229.043.496.319 /

(28.670.439.792.000+25.550.580.441.639)/2

22,98%


Return on Asset = Net Income/average total asets

633.859.683.713/

((25.550.580.441.639+20.444.622.381.510)/2)

2,76%

3. Return on Stockholders’ Equity

Return on stockholders’ equity is similar to return on assets except it removes the

effect of funds the corporation has borrowed. The ratio is calculated by dividing

income from continuing operations by the average stockholders’ equity through the

year.

Returnon Equity=Income¿Continuing Operations for Current Year ¿(Current Year Equity+PreviousYear Equity )/2


Total equity for the current and previous years appear on the balance sheet; however,

because a balance sheet typically shows only two years of data, previous year total

equity may appear in another section of the annual report. Compute the return on

stockholders’ equity for the current and previous year:


Return on Equity = Net Income/average total equity

6.229.043.496.319 /

(11.732.080.390.253+7.075.257.169.426)/2

66,24%


Return on Equity = Net Income/average total equity

633.859.683.713

/( (7.075.257.169.426+5.936.889.949.184)/2)

9,74%

What corporate characteristic causes the return on assets and return on equity

percentages to be different?

Answer:

The characteristic of the corporate are corporate which distribute and transmite

natural gas. In 2009, PGN’s Total Assets stood at Rp28.67 trillion and comprised

32% Current Assets and 68% Non-current Assets. This Total Asset value represented

an increase of Rp3.12 trillion or 12% from Rp25.55 trillion in 2008, which was

driven largely by the increase in Current Assets of 78% to Rp9.26 trillion. Equity

rose 66% or Rp4.66 trillion from Rp7.08 trillion in 2008 to Rp11.73 trillion in 2009.

This increase was largely due to an increase in State of the Republic of Indonesia

capital stock, which was caused by the conversion of Government Project Funds

(DPP) and the increase in retained earnings causes by the achievement of net income

in the current year as well as the decline in foreign exchange due to the translation of

the subsidiaries’’ financial statements.


All three of the preceding ratios indicate profitability by comparing income from

continuing operations to another number in the income statement or balance sheet. In

comparison to the previous year, has the corporation improved its ability to generate

a profit? Justify your answer based on ratios you calculated.

Answer:

Yes, they have. The corporation have improve theire ability to generate profit, it

show from increasing Return on Asset about 20%, 2,76% in 2008 and 22,98% in

2009. It means, there are efficiency program in this company to generate profit like

efficiency production cost and minimalize using of assets to production cost.

4. Earnings Per Share

The earnings per share ratio (EPS) represents the amount of earnings attributable to

each share of stock in the corporation. The ratio is considered so important that

GAAP requires EPS disclosure on the face of the income statement (FAS 128, IAS

33). In its simplest form, EPS is calculated by dividing net income, less preferred

stock dividends, by the average number of common shares outstanding. If the

corporation has income or losses from discontinued operations or extraordinary

items, the effects of these items on earning per share must be disclosed separately.

In the spaces below, record the basic earnings per share for continuing operations as

it appears on the income statement:

Current Year (2009) Previous Year (2008)

Rp 256, 96 Rp 27, 60

Did the current EPS improve compared to the previous year? Was the change in EPS

a result of changes in the numerator of the denominator of the ratio? Explain.

Answer:

Yes, EPS was increase. It is because increasing volume of share outstanding and

increasing amount of devident paid to stockholder. Rp 786.282.470.324 in 2008 and

Rp 1.000.000.000.000 in 2009.


The equity section of a balance sheet may have dilutive securities (such as options,

convertible bonds and convertible preferred stock) that can decrease EPS by

increasing the number of shares in the denominator. In this case, the corporation may

be required to show a diluted EPS in addition to the basic EPS. Were diluted EPS

disclosed by the corporation? If so, what equity securities in the balance sheet have

the potential of increasing the EPS denominator?

Answer:

No, there aren’t diluted EPS disclosed by this company.

5. Cash Dividends Per Share

Cash dividends per share is similar to earnings per share except the numerator

excludes the portion of earnings retained in the corporation. In other words, the ratio

indicates the amount of cash dividends the stockholder received during the year for

each share of sock owned.

Cash Dividends Per Shares=Cash Dividends Paid ¿Common Stockholders ¿(Current Year Number of Shares+Last Year Number of Shares ) /2

The dividend paid to common stockholders appears in the statement of retained

earnings. The number of common stock shares outstanding appears on the balance

sheet; however, because a balance sheet typically shows only two years of data,

previous year total equity may appear in another section of the annual report.

Compute the cash dividends per share for the current and previous year:

Current year (2009) Previous year (2008)

Rp 154, 20 Rp 41, 74

6. Dividend Payout Ratio

The dividend payout ratio indicates the percentage of earnings returned to the

stockholder rather than retained in the corporation. The ratio is computed by dividing


cash dividends paid to common stockholders by the amount of income available for

payment of common stock dividends.

Dividend Payout Ratio=Cash Dividends Paid¿Common Stockholders ¿Net Income−Preferred Dividends Paid

The dividend paid to common and preferred stockholders appears in the statement of

retained earnings. Net income appears on the income statement. Compute the

dividend payout ratio for the current and previous year.


60.01% 151.24%

7. Price/Earnings (P/E) Ratio

The P/E ratio measures the relationship between the earnings of the corporation and

the current market price. A corporation with a P/E ratio of 15 is said to be selling at

15 times its current earnings. Some analysts believe the P/E ratio is a good measure

of the future earnings power of a corporation. Companies with high P/E ratio have a

stock price that reflects the expectation of higher future earnings. A lower P/E ratio

may indicate that lower earnings expectations are reflected in the corporation’s stock

price.

Price / Earnings Ratio=Market Price Per ShareEarnings Per Share

Calculate the P/E Ratio for the current and previous year. If end of the year market

price of common shares are not available, use an average of the high and low price

during the last quarter of the year.


16.11% 98.28%

In the past decade, the average P/E ratio for major corporations has ranged from 14

to 25. How does the corporation’s P/E ratio compare to this range? What may be

concluded concerning the expected growth of the corporation?

Answer:


It is in major corporation. There is decreasing number percentage price/ earning

ration than previous year, its because the split off stock in 2009. PGN converted the

Government Project Funds into new series B shares in the name of the State of the

Republic of Indonesia, amounting to 992,724,172 shares based on Government

Regulation No. 82 Year 2008, on 14 April 2009. On 1 September 2009, the

Government issued Government Regulation No.52 Year 2009. To follow up this

regulation, on 30 September 2009 PGN issued new series B shares in the name of the

State of the Republic of Indonesia, amounting to 281,598,059 shares.

B. ANALYSIS OF LIQUIDITY

A common misconception is that corporations become bankrupt because they are

unprofitable. In reality, bankruptcy is declared because a corporation is not able to

meet the current obligations to the creditors, not when the corporation lacks

profitability.

Current assets are called “current” because they are converted into cash during the

operating cycle. Current liabilities are liabilities that will be liquidated by current

assets or by the creation of other current liabilities.

Liquidity ratios indicate the corporation’s ability to meet short-term cash

requirements. For this reason, liquidity ratios are important to potential and existing

creditors. There are two commonly computed liquidity ratios:

1. Current (or Working Capital) Ratio

The current ratio indicates whether the firm will have enough resources to meet

obligations becoming due during the next period. The current ratio is the quotient of

current assets divided by current liabilities. The ratio is usually expressed in a format

in which the denominator is equal to “1”, for example, if current assets were twice as

much as current liabilities the ratio is expressed as “2:1”.

Current Ratio =Current AssetsCurrent Liabilities

Strictly speaking, a ratio less than one indicate a corporation will not meet

obligations due during the next period without additional resources. On the other


hand, a ratio of greater than one indicates the corporation is currently is able to meet

current liabilities as they become due. All components of the current ratio appear in

the current sections of the balance sheet. Compute the current ratio for the current

and previous year:


Current Ratio = current asset/ current liability

9.263.400.994.474 / 3.729.795.011.315

2,5


Current Ratio = current asset/ current liability

5.196.657.527.285/ 3.297.977.346.109

1,6

Based on the current ratio you calculated, do you believe the corporation able to meet

the current obligations as they become due? Why? Has the corporation established

lines of credit with lenders to obtain working capital if needed? ( Lines of credit,

revolving)

Answer:

Yes, i do. I beleive that this company can paid current obligation. 1 obligation

guarantee with 2,5 current assets.

Net working capital is equal to current assets minus current liabilities. What is net

working capital for the current year?

Working Capital= current asset - current liability

9.263.400.994.474 - 3.729.795.011.315

Rp 5.533.605.983.159

2. Quick (or Acid-Test) Ratio


The quick ratio recognizes certain current assets are more liquid than others. For

example, inventories are usually not immediately available for the liquidation of

current liabilities because the corporation must first sell inventoried items to obtain

cash.

The quick ratio is similar to the current ratio except the numerator includes only

current assets which may be readily turned into cash. These current assets include

cash, marketable securities, and net receivables.

Quick Ratio =Cash + Marketable Securities + Net ReceivablesCurrent Liabilities

All components of the quick ratio appear in the current sections of the balance sheet.

Compute the quick ratio for the current and previous year:


Quick Ratio = cash+marketable securities+AR / current liability

6.593.237.069.338+1.650.388.514.530+60.811.440.659+14.120.479.466 /

3.729.795.011.315

2,23


Quick Ratio = cash+marketable securities+AR / current liability

3.499.801.390.503+1.588.974.619.313+21.046.986.465+9.712.399.398/

3.297.977.346.109

1,55


Based on your assignment of the two liquidity ratios you calculated, did the

liquidity position of the corporation strengthen or weaken compared to the

previous year? What were the reasons for the change, if any?

Answer:

Yes, the liquidity position were strengten compared to previous year. It because

increase in number of cash and account receivable in 2009.

C. ANALYSIS OF SOLVENCY

Solvency ratios measure the corporation’s ability to manage debt. The ratios

indicate risk to long-term creditors and equity investors. ( Debt worksheet)

1. Debt to Total Assets

The debt to total assets ratio measures the amount of leverage used by the

corporation. The ratio indicates what percentage of the assets of the corporation is

financed by those other than stockholders of the corporation.

Debt to Total Assets =Total LiabilitiesTotal Assets

All components of the debt to total assets ratio appear on the balance sheet.

Compute the debt to total assets ratio for the current and previous year:


Debt to total assets = Total liabilities/total assets

15.892.626.383.617/ 28.670.439.792.000

55,43%


Debt to total assets = Total liabilities/total assets

17.480.499.661.543 /25.550.580.441.639

68,42%


How did the debt position of the corporation change over the last year? What were

the reasons for these changes, if any?

Answer:

There are ratio decreased by 7% from the previous year. At the end of 2009,

Current Liabilities increased 13% to Rp3.73 trillion. Current Liabilities are

composed of Trade Payables, 22%; Short-term Bank Loan, 6%; Other Payables,

7%; Accrued Liabilities, 22%, Taxes Payable, 19%; Current Maturities of Long-

term Loans, 21%, and Current Maturities due to a Shareholder of a Subsidiary,

3%. the increase in Current Liabilities of Rp431.82 billion or 13% was largely

attributable to the rise in Taxes Payable in connection with the increase in Ar ticle

29 income Taxes payable as a consequence of the higher income before tax. Non-

Current Liabilities, amounting to Rp 12.16 trillion, consist of Deferred Tax

Liabilities 1%, Long-term Loans - Net of Current Maturities 82%, Derivative

Payables 10%, Due to a Shareholder of a Subsidiary - Net of Current Maturities

5% and Estimated Liabilities for Employees’ Benefits 2%. The decline in Non-

Current Liabilities of Rp2.02 trillion or 14% was due primarily to exchange rate

translation of Long-term Loans - Net of Current Maturities.

2. Time Interest Earned Ratio

When payment of interest on debt becomes significant in proportion to the

corporation’s annual income, it is often evidence the corporation is spending too

much of its resources servicing debt. The times interest earned ratio indicates the

relationship of interest expense to income. The ratio is computed by dividing

income before tax and interest expense by interest expense.

Times Interest Earned =Net Income + Interest Expense + Tax ExpenseInterest Expense

All of the components of the times interest earned ratio appear on the income

statement. Compute the times interest earned ratio for the current and previous

year:



Times Interst Earned = Net income+interest expense+tax expanse/ intersest expense

(6.229.043.496.319+558.262.115.674+1.814.303.974.948)/

558.262.115.674

15 times


Times Interst Earned = Net income+interest expense+tax expanse/ intersest expense

(633.859.683.713+547.212.033.095+518.010.913.093)

/547.212.033.095

3 times

Some believe the times interest earned ratio is more appropriately calculated on

cash basis. In this way, the ratio indicates the corporation’s ability to pay interest

from the cash from operations. (Cash paid in interest may differ from interest

expense to the extent of accruals are made or a premium or discount is amortized.)

In this case, the numerator includes cash flow from operations as it appears in the

cash flow statement. The denominator is cash paid for interest, which appears in

the cash flow statement or the note describing the corporation’s debt obligations.

Times Interest Earned on the Cash Basis =

Cash Flow from Operations + Cash Paid for InterestCash Paid for Interest

Compute the times interest earned on the cash basis for the current and previous

year:


Times Interst Earned on the cash

Basis =

Cash flow from operations+cash paid for interest/ cash paid

for interest

(6.952.934.696.174+518.448.751.289)/ 518.448.751.289

14 times



Times Interst Earned on the cash

Basis =

Cash flow from operations+cash paid for interest/ cash paid

for interest

(3.778.938.944.245+466.723.802.544) /466.723.802.544

9 times

VI. INDUSTRY OR COMPETITOR COMPARISONS

One way to evaluate corporate success is to compare the corporation to others in

the industry. Industry common-size percentages and ratios are easily obtained in

most libraries. (See Appendix B, Obtaining Data for Industry Comparisons) Most

sources of industry wide data are organized by Standard Industrial Classification

(SIC) codes and by corporation size within that code. SIC codes for a specific

corporation are identified in the 10-K report of the corporation. ( Standard,

industrial)

Alternatively, you may want to compare your corporation to their closest

competitor. Information concerning a primary competitor may be obtained in the

annual report to stockholders or the Form 10-K of the competitor.

Mark the comparison method you will use:

Industry Comparison

SIC Code: Not Available

Industry Name: Not Available

Source of industry-wide data: Not Available

All industry comparisons should be made using the same fiscal years. The most

current year of operations may not yet be available in the industry source. What is

the year of the comparison you will be making?( Not Available)

Primary Competitor Comparison

Name of Competitor: Not Available

In the following table, copy (1) common-size data and ratios calculated earlier for the

appropriate year, and (2) the corresponding industry or comparison data. You may need


to adjust certain ratios to make them comparable. For example, if earnings before taxes

are used to calculated return ratios for the industry, you should calculate your

corporation’s ratio in a similar manner. If the data is not available, indicate this by writing

“NA” in the blank. ( Competitor Analysis worksheet)

Corporation Industry or Competitor

Income Statement Common-Size Data

Gross Profit/Sales

Income from Continuing Operations/Sales

59.94%

34.56%

Not Available

Balance Sheet Common-Size Data

Current Assets/Total Assets

Current Liabilities/Total Liabilities

Liabilities/Total Assets

Equity/Total Assets

32.31%

23.47%

55.43%

40.92%

Not Available

Profitability Ratios

Profit Margin

Return on Assets

Return on Equity

Dividend Payout Ratio

42.59%

22.98%

66.24%

60.01%

Not Available

Liquidity Ratios

Current Ratio

Quick Ratio

2.5: 1

2.23: 1Not Available

Solvency Ratios

Debt/Total Assets

Times Interest Earned

55.43%

15 times

Not Available

Operational Ratios

Receivable Turnover

Inventory Turnover

11 times

2,86 timesNot Available

However, (Perusahaan Gas Negara) has no competitors with similar types of

business with this company. It belongs to the monopolist company engaged

in distribution and transmission of natural gas.


VII.MAKING DECISIONS BASED ON THE ANNUAL REPORT

(CONCLUSION)

1. How would you assess the corporation’s revenue performance over the last

few years (for example, is it increasing, stagnant, declining)? What are the

reasons for your assessment?

Answer:

Corporation’s revenue performance over the last few year were Increasing, the

reason are:

a. increase in Revenues in line with the growth in natural gas distribution

sales volume of 37% to 792 MMScfd, and gains on foreign exchange of

Rp1.24 trillion, due to the strengthening of the Rupiah against the US

Dollar and the Japanese Yen.

b. In 2009, PGN booked a revenues of Rp18.02 trillion, up 41 % from 2008.

This was derived from our three business segments: gas distribution, gas

transmission and fiber optic lease. The contribution of each segment to our

revenues in 2009 was as follows: gas distribution 90.88%, gas

transmission 9.01%, and fiber optic lease 0.11%.

2. What factors (such as the economy, consumer demand, product innovation,

competition, regulation, etc.) will have the greatest influence on in the

determination of next year’s revenue? In what way would these factor(s)

influence revenue?

Answer:

Customer demand will be greatest influece on in the determination of next

year’s revenue. Natural gas is an environmentally friendly energy source.

Compared to oil-based fuels and coal, natural gas burns more cleanly,

releasing fewer potentially harmful emissions into the atmosphere. With the

country’s abundant reserves, natural gas has emerged as the most appropriate

substitute for oil-based fuel. With lower, more stable prices in its favor against

oil based fuel, natural gas promotes cost efficiencies for users. Vigorous


domestic demand for natural gas is still moving upward in line with the steady

growth of the national economy. With significant ongoing infrastructure

developments augmenting our existing gas assets, PGN has arrived as an agent

of change in energy delivery.

3. What do you predict revenue to be next year?

Answer:

- Pessimist estimation, revunue only increase 20% from this year. So

revenue will be Rp 21.84 trillion.

- Optimistic estimation, revuenue will increase by same percentage

increase in this year from previous year, 41%. So revenue will Rp

25.662 trillion.

4. How would you assess the income performance of the corporation over the

last few years?

Answer:

In 2009, PGN recorded net income growth by 883%, the highest among public

companies listed on LQ45 index of Indonesia Stock Exchange (IDX). In 2009,

PGN managed to book Rp7.68 trillion in Income From Operations, an

increase of 65% over the previous year. This made an increase in Margin of

Income from Operations to 43% in 2009, compared to 36% in 2008.

5. What do you predict net income to be next year?

Answer:

- Pessimist estimation, net income only increase 100% from this year.

So income will be Rp 12.458 trillion.

- Optimistic estimation, income will increase by half percentage increase

in this year from previous year, 400%. So revenue will Rp 37.374

trillion.


6. How would you assess the corporation’s total asset growth rate (for example,

rapid increase, stable increase, stagnant, declining)? What evidence justifies

your answer?

Answer:

In 2009, PGN’s Total Assets stood at Rp28.67 trillion and comprised 32%

Current Assets and 68% Non-current Assets. This Total Asset value

represented an increase of Rp3.12 trillion or 12% from Rp25.55 trillion in

2008, which was driven largely by the increase in Current Assets of 78% to

Rp9.26 trillion. PGN’s Current Assets grew 78% to Rp 9.26 trillion in 2009.

This was mainly attributable to a 88% increase in cash and Cash Equivalents

and a 4% increase in trade receivables.

a. Cash and Cash Equivalents, This item consists of cash and bank accounts

amounting to Rp1.13 trillion and Rp5.46 trillion of Cash Equivalents in

unrestricted time deposits. The cash and cash equivalents comprise 26% in

IDR and 74% in USD. Cash Equivalents in time deposits placed in a number

of domestic and foreign banks, of which amount 71% is denominated in USD

and 29% is denominated in Rupiah. The average USD time deposit interest is

in the range of 1.10% – 5.00% while for the IDR times deposits it ranges from

5.00% - 12.00%. Cash in current accounts denominated 89% in USD, 10% in

IDR and 1% in JPY. Total Cash and Cash Equivalents increased 88% from

Rp3.50 trillion in the last year, due mainly to the increase in revenue from

operational activities.

b. T rade Receivables-Net, The 4% increase in Trade Receivables - Net from

Rp 1.59 trilion in 2008 to Rp1.65 trilion in 2009 was in line with the increase

in PGN’s revenues. By composition, Gas Distribution accounted for 89% and

Gas Transmission accounted for 11% of Trade Receivables- Net in 2009.

Meanwhile, total Trade Receivables - Net in USD for distribution and

transmission reached USD107.97 million and USD19.79 million, respectively.

In 2009 PGN allocated Rp30.55 billion for the Allowance for Bad Debts, all

of which originate from the Gas Distribution business. This provision is

intended to cover potential losses on uncollectible trade receivables. Going


forward, uncollectible receivables may only be written off with the approval

of the Board of Commissioners.

c. Current Maturities of Advances, The 12.968% increase in Current

Maturities of Advances from Rp6.03 billion to Rp787.59 billion in 2009

caused by reclassification of take or pay to Non-Current Assets amounted to

Rp1.33 trillion in 2009 and Rp1.98 trillion in 2008 and interim dividend

amounted to Rp242.40 billion. This interim dividend will be included in the

stipulation of dividend year 2009 at the Annual General Meeting of

Shareholders. Non-current assets decreased by 5% to Rp 19.41 trillion. This

was largely the result of a reclassification of take or pay from Current Assets

and a decline in Fixed Assets.

7. Do you expect total assets to increase, decrease, or remain relatively the same

next year? Justify your answer.

Answer:

Yes, I expect total assets wiil increase next year. It because Since surpassing

one billion dollar revenues in 2008, PGN has continued to pursue this vision

by strengthening the core business, developing the gas processing business,

developing operational and engineering businesses and maximizing the

potential of the Company’s resources and assets in order to intensify efforts to

guarantee security of supply. At the same time, PGN has begun to apply

international standards of good corporate governance to ensure an efficient,

programmed and integrated business operation.

8. Do you believe the corporation will need additional financing to meet needs

over the next few years? Why or why not? If financing is needed, do you

believe the corporation would be able to obtain financing easily?

Answer:

Yes, I believe the corporation will need additional financing to meet needs

over the next few years. Because company stiil have some development plan,

such as:


- SSWJ Project, the South Sumatera - West Java (SSWJ) pipeline

ransmission project.

- West Java Distribution Project (PDJB)

And I believe that the corporation will be able to obtain financing easily.

Besause, The long-term outlook for the company is very positive. Although

the tightening supply situation signals the end of the current spectacular

growth phase, we are already putting the\ foundations in place for sustainable,

if more moderate, growth. Our first two LNG receiving terminals, in West

Java and North Sumatra, will be in service by 2013. LNG is a high priority

area for the government and we see immense potential for growth here. We

are evaluating our options for tapping into Indonesia’s considerable CBM

potential. And we are getting into position to acquire upstream assets that will

provide some security of supply. Thanks to the far-sighted planning and

investment program put in place several years ago, astute management and the

strong performance we are currently enjoying, PGN has the financial

resources to manage this agenda. The human resources pose more of a

challenge. While we have strong leadership in place and world class expertise

in our core business, we need to move decisively to acquire the right mix of

skills, competencies and experience that will enable us to establish a

competitive advantage in our chosen growth areas.

9. Identify what you believe to be the three strongest aspects of the corporation.

Describe why these might be considered advantages.

Answer:

a. Revenue growth, that 2009 was another year of strong results for PGN, as

we delivered revenue growth of more than 40% from Rp12.79 trillion to

Rp18.02 trillion and sales volume grew by 37% from 578 MMScfd to 792

MMScfd. Having surpassed a landmark of one billion dollars in revenue in

2008, we passed another important milestone at the end of 2009 when the

Company’s market capitalization reached US$10 billion.

b. The Company’s strong operational and debt profile, PGN received

corporate credit ratings from two international ratings institutions,


Moody’s and S&P. Moody’s awarded us a rating of Ba2 with a stable

outlook, while S&P gave a BB- rating, also with a stable outlook. These

ratings reflect strength of PGN’s credit, due to the Company’s strong

operational and debt profile, dominant position in the industry, positive

gas demand trends and stable gas transmission and distribution business.

c. Strong liquidity, with cash and cash equivalents, At the end of 2009 the

ratio of total liabilities to liquidity was 1. PGN has strong liquidity, with

cash and cash equivalents worth Rp6.59 trillion with Current Ratio 248%.

10. Identify what you believe to be the three weakest aspects of the corporation. Is

it likely these weaknesses can be overcome in the next few years?

a. Limitations of the source operation, limited natural resources are natural

gas causes the operating system companies relyon it and allow

for the decrease of production power company.

b. consumer consumption limitations, customers are still limited to causing

the expansion of distribution areas is hampered. But this can become a

separate business opportunities for the company.

c. Highly nominal of Debt to Total asset ratio 55,43%. Its means that

most of the companies financed by long-and short-term debt. this will be

a threat tothe company to repay its debts.

11. Are you optimistic or pessimistic concerning the future of the corporation?

What specific corporate or industry characteristics influence your opinion?

Answer:

I am optimistic concerning the future of the corpotation. Because:

- The power sector, having recognized that it can no longer rely on

expensive oil-based fuels to supply electricity to fulfill Indonesia’s

growth needs, is moving aggressively to convert more of its power

plants to natural gas—and making huge savings in the process: up to

Rp 12-15 trillion per year. This, in turn, is taking some pressure off

Government as the need for subsidies is reduced. And as further we

expand our distribution networks, more businesses and industries are


able to reduce their costs by taking advantage of comparatively low

cost natural gas.

- The management’s intensive marketing drive during 2009 helped ramp

up demand for natural gas to unprecedented levels, and this was just in

the areas currently reached by our distribution networks. Beyond this,

there is still a vast potential market that remains untapped. However,

our existing long-term purchase contracts with suppliers are no longer

sufficient to fulfill this pentup demand, and we are now facing a

supply gap. Our key challenge going forward will be to secure

guaranteed supplies elsewhere, and this will require very significant

capital expenditure.

- The Board of Directors has outlined its strategy for overcoming this

challenge in the long-term strategic plan for 2010 to 2020. The plan

gives us a clear vision of where we want the company to go and how

we address the complexities of a rapidly evolving energy landscape in

Indonesia. The solution is to go beyond pipelines, by pursuing strategic

growth opportunities such as LNG, Coalbed Methane (CBM), and

minority participation in the upstream.

12. Would you invest in the capital stock or bonds (if applicable) of this

corporation if you had sufficient funds? Would you rather invest in one of the

corporation’s competitors? What are the reasons for your decision?

Answer:

Yes, if i had sufficient funds, i will invest in the capital stock or bonds (if

applicable) of this corporation. Because this company have greater prospect to

evolve. PGN has no competitors in similar business. Therefore, the company

is further strengthening its position to expand the distribution and

transmission of natural gas inIndonesia.


puput swastika, fsa final project

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